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ACQUISITION OF INTERNATIONAL ROYALTY CORPORATION
12 Months Ended
Jun. 30, 2012
ACQUISITION OF INTERNATIONAL ROYALTY CORPORATION  
ACQUISITION OF INTERNATIONAL ROYALTY CORPORATION

5. ACQUISITION OF INTERNATIONAL ROYALTY CORPORATION

        On February 22, 2010, Royal Gold, through a wholly-owned Canadian subsidiary, RG Exchangeco, acquired all of the issued and outstanding common shares of International Royalty Corporation (the "IRC Transaction"). The purchase price for the IRC Transaction consisted of approximately $350.0 million in cash, 5,234,086 shares of Royal Gold common stock (valued at $230.4 million on February 22, 2010) and 1,806,649 exchangeable shares of RG Exchangeco (valued at $79.5 million on February 22, 2010), which shares are convertible at any time on a one-for-one basis for Royal Gold common stock. The IRC Transaction further complemented and expanded our royalty portfolio.

        The Company followed the acquisition method of accounting in accordance with ASC 805. During the three months ended March 31, 2011, the Company finalized its assessment of the fair value of the assets acquired and liabilities assumed as part of the IRC Transaction. The following table summarizes the fair values of the assets acquired and liabilities assumed from IRC:

 
  Preliminary purchase
price allocation
as of June 30, 2010
  Purchase price
adjustments
  Final purchase
price allocation
as of June 30, 2010
 
 
  (amounts in thousands)
 

Purchase price

  $ 659,871   $   $ 659,871  
               

Current assets

  $ 83,720   $ 1,069   $ 84,789  

Royalty interests in mineral properties

    774,291     8,816     783,107  

Other assets

    14,304     (4,911 )   9,393  

Current liabilities

    (10,839 )   (974 )   (11,813 )

Senior secured debentures

    (28,769 )       (28,769 )

Net deferred tax liabilities

    (140,891 )   (3,395 )   (144,286 )

Uncertain tax positions

    (8,362 )   (605 )   (8,967 )

Other liabilities

    (2,878 )       (2,878 )

Non-controlling interest

    (20,705 )       (20,705 )
               

Total allocated purchase price

  $ 659,871   $   $ 659,871  
               

        The purchase price adjustments were attributable to the Company receiving updated mineral property and tax attribute information. The above purchase price adjustments are reflected in the Company's consolidated balance sheet as of June 30, 2010. There was no impact to the Company's statement of operations for the period from February 22, 2010 to June 30, 2010, as a result of the purchase price adjustments.

        For the twelve months ended June 30, 2010, the Company incurred approximately $8.6 million of transaction costs for financial advisory, legal, accounting, tax and consulting services as part of the IRC Transaction. The Company also incurred approximately $10.8 million in severance related payments as part of the termination of IRC's officers and certain employees upon acquisition of IRC. The transaction and severance payment costs are included in Severance and acquisition-related costs on our consolidated statements of operations and comprehensive income and were recognized separately from the purchase price for the IRC Transaction.

        The non-controlling interest arising from the IRC Transaction is the result of IRC's indirect ownership of a 90% interest in the Labrador Nickel Royalty Limited Partnership ("LNRLP"), which owns 100% of the Voisey's Bay NSR royalty. The owner of the remaining 10% interest in LNRLP is Altius Resources Inc. ("Altius"), a company unrelated to Royal Gold and IRC. Due to the legal structure of LNRLP and certain related factors, the Company determined that LNRLP should be fully consolidated. The fair value of the non-controlling interest was determined based on its proportionate share to the underlying assets and liabilities of the partnership.

        The Company's consolidated financial statements include the results of the IRC Transaction from the date of acquisition. The following unaudited pro forma information is presented as if the IRC Transaction had been completed as of the beginning of the fiscal year ended June 30, 2010. The pro forma results are not necessarily indicative of what would have been achieved had the IRC Transaction been in effect for the fiscal year ended June 30, 2010.

 
  Fiscal Year Ended
June 30, 2010
 
 
  (in thousands)
 

Royalty revenues

  $ 152,716  

Net income (loss) available to Royal Gold common stockholders

  $ (434 )

        For the period February 22, 2010, through June 30, 2010, approximately $9.0 million of royalty revenue was recorded on the Company's consolidated statements of operations and comprehensive income related to royalties acquired in the IRC Transaction. In the above pro forma, net income attributable to Royal Gold common stockholders as of June 30, 2010, included approximately $19.4 million in transaction costs and severance related payments related to the IRC Transaction.